Volkswagen agrees $15bn settlement over vehicle emissions cheating scandal

The deal, which is due to go to a California judge for approval, represents the largest US civil settlement ever agreed by a car manufacturer

A Volkswagen production line in Wolfsburg, Germany. The company has offered to buy back affected vehicles from as many as 475,000 owners (Reuters)

Volkswagen has said it will settle claims from a lawsuit over its emissions cheating scandal to the tune of almost $15bn (£11.35bn), the largest US civil settlement ever agreed by a car manufacturer.

The company admitted last September that, since 2009, it had installed illegal software in some 11 million diesel cars worldwide, disguising the true level of pollutants emitted by the vehicles during air quality tests – a level significantly greater than permitted under US law.

First reported by Bloomberg News, the $14.7bn settlement includes approximately $10bn to buy back cars at their pre-recall value from the owners of almost 500,000 “clean diesel” Volkswagen vehicles, as well as cash compensation of up to $10,000 for each driver.

The German firm, which also owns Audi and Porsche, will spend $2bn on clean emissions technology and pay $2.7bn in fines to the US Environmental Protection Agency (EPA). Car owners have the alternative of seeing their existing vehicles modified to meet emissions standards, though the fix proposed by Volkswagen remains subject to EPA approval.

The terms of the settlement are set to be signed off by a California judge on Tuesday but, even if they are approved, Volkswagen still faces similar legal difficulties elsewhere in the world, including in Germany.

The agreement is one of the largest corporate settlements in US history, though it is dwarfed by the biggest of all: the $206bn Tobacco Master Settlement Agreement reached between the US and the country’s four largest tobacco companies in 1998.